The basics (Session 1)

Question 1

Accounting helps organisations make decisions such as…

Answer 1

Whether to invest
Whether to lend money
Whether to sell goods
Whether to develop a new product
Whether to increase operating capacity

Question 2

Financial accounting

Answer 2

Financial accounting provides information to users external of the organisation, usually about the past, with the information produced measured in monetary terms

Question 3

Management accounting

Answer 3

Provides information internally within the firm, concerned about the future, information helps with the decision making process and is acquired from non financial information

Question 4

Characteristics of useful accounting information

Answer 4

Relevance
Reliability
Comparability
Understandability
Timeliness
Verifiability

Question 5

Types of organisations that produce accounting information

Answer 5

Companies PLC and LTD
Sole proprietor
Non profit sector
Partnerships

Question 6

Main users and their interests in accounting information

Answer 6

Investors/owners- Profits, Dividends, security of investment

Investment analysts- possible risk and return, purchase or sale

Managers- Daily info, comparison with previous figures

Lenders- Will they pay interest back, security of loan

Customers- Will they supply for the foreseeable

Suppliers- Extend credit, Will they pay debts